Sompo Japan Ins. Co. v. Yang Ming Marine Trans.

• Decision Date: 24 September 2008
• Docket Number: No. 07 Civ. 11276(DC).,07 Civ. 11276(DC).
• Citation: 578 F.Supp.2d 584
• Parties: SOMPO JAPAN INSURANCE COMPANY OF AMERICA and Sompo Japan Insurance, Inc., Plaintiffs, v. YANG MING MARINE TRANSPORT CORP., Defendant.
• Court: U.S. District Court — Southern District of New York

578 F.Supp.2d 584

SOMPO JAPAN INSURANCE COMPANY OF AMERICA and Sompo Japan Insurance, Inc., Plaintiffs, v. YANG MING MARINE TRANSPORT CORP., Defendant.

No. 07 Civ. 11276(DC).

United States District Court, S.D. New York.

September 24, 2008.

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Maloof Brown & Eagan LLC, by David T. Maloof, Esq., Thomas M. Eagan, Esq., Rye, NY, for Plaintiffs.

Keenan Cohen & Howard P.C., by Charles L. Howard, Esq., Paul D. Keenan, Esq., Jenkintown, PA, and Gutterman & Associates, by Barry N. Gutterman, Esq., New York, NY, for Defendant.

OPINION

CHIN, District Judge.

On April 18, 2006, three cargo shipments insured by plaintiffs Sompo Japan Insurance Company of America and Sompo Japan Insurance, Inc. (together "Sompo") were damaged when the train carrying the cargo derailed in Texas. Sompo asserts twelve claims against defendant Yang Ming Transport Corporation ("Yang Ming")—the company that arranged for the transport of the cargo aboard the train—to recover for the damage.

Yang Ming moves to dismiss nine of the twelve counts against it. First it moves to dismiss the claims brought under the Carmack Amendment ("Carmack")¹ pursuant to Fed.R.Civ.P. 12(b)(6); second, if the Carmack claims survive, it moves to dismiss the common law negligence and breach of bailment claims as preempted; and, third, if the Carmack claims survive, it moves to dismiss for improper venue under Fed.R.Civ.P. 12(b)(3). For the reasons that follow, defendant's 12(b)(6) motion is denied with respect to the Carmack claims, the common law claims are dismissed as preempted, and defendant's motion to dismiss for improper venue is granted. As the remaining three claims arise from the same nucleus of common fact as the Carmack claims, they are dismissed sua sponte for improper venue.

BACKGROUND

A. Facts

The relevant facts are described in detail in the Court's March 20, 2008, decision in a related case, Sompo Japan Insurance Co. v. Norfolk Southern Railway Co., 540 F.Supp.2d 486 (S.D.N.Y.2008) (the "related case"), and are not disputed.

To summarize, in late March and early April 2006, the Kuboto, Unisia, and Hoshizaki companies arranged to ship tractors, auto parts, ice makers, and sushi cases from Japan by boat to the Port of Long Beach, California, and then by train to destinations inland in the eastern United States. (Compl.¶¶ 6, 12, 17). Sompo insured these cargo shipments. (Id. ¶¶ 3, 9, 15).

Sompo's insureds hired Yang Ming to arrange for the shipment of their cargo from Asia to their final destinations. (Id. ¶¶ 8, 14, 19). Yang Ming arranged for both the ocean passage of the cargo from Asia to California and the rail transportation from California to the final domestic destinations. (Id.; see Barton Decl. Ex. 2). The cargo was transported under Yang Ming through bills of lading. (Compl.¶¶ 6, 12, 17).

The cargo was first delivered in good condition to Yang Ming in Japan, and loaded aboard the M/V CHEROKEE BRIDGE. (Id. ¶¶ 6, 12, 17). The cargo was then transported across the Pacific Ocean on the M/V CHEROKEE BRIDGE, discharged in the Port of Long Beach, California, and placed on rail lines owned and operated by the BNSF Railway. Sompo Japan Ins. Co., 540 F.Supp.2d at 489-90. For the final rail leg of the trip, Yang Ming retained Norfolk Southern Railways Corporation ("NSRC"). Id. at 490. In Dallas, Texas, the containers were interchanged from BNSF Railway to NSRC for the final leg of carriage inland. Id. Sompo's insureds had no dealings or contracts with NSRC or any other railroad operator regarding the transport of their cargo—rather, Yang Ming was their contact. Id. at 491.

On April 18, 2006, the NSRC train carrying the cargo derailed in Texas. The derailment damaged various cargo on board, including the Kuboto tractors, Unisia auto parts, and Hoshizaki ice makers and sushi cases. Id. at 489.

B. Procedural History

On April 4, 2007, Sompo filed the related case against NSRC, Norfolk Southern Corporation, and The Kansas City Southern Railway Company to recover for the damage to the cargo, alleging that defendants owned and/or operated the railroads and rail lines along which the cargo was transported.² On December 14, 2007, Sompo filed the instant action against Yang Ming, seeking damages for each of the three shipments for (1) violations under 49 U.S.C. § 11706, a provision of Carmack, (2) common law negligence, (3) common law breach of bailment, and (4) breach of contract and breach of duties under the Carriage of Goods By Sea Act ("COGSA"). Sompo's complaint alleges that Yang Ming was the "delivering rail carrier" under Carmack, and therefore liable under Carmack.

On February 25, 2008, Yang Ming moved to dismiss the Carmack claims pursuant to Rule 12(b)(6). If the Carmack claims survive the motion, Yang Ming asks that the Court dismiss the common law claims as preempted, and alternatively moves to dismiss the Carmack claims for improper venue pursuant to Rule 12(b)(3). On June 16, 2008, I held oral argument. I now consider defendant's motion.

DISCUSSION

A. Motion to Dismiss for Failure to State a Claim Upon Which Relief May Be Granted

I conclude that plaintiffs have stated Carmack claims against Yang Ming upon which relief may be granted, and dismiss the preempted common law negligence and breach of bailment claims.

1. Applicable Law

a. Rule 12(b)(6) Standard

On a Rule 12(b)(6) motion to dismiss, a court must accept a plaintiffs factual allegations as true and draw all reasonable inferences in its favor. Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996); see Erickson v. Pardus, ___ U.S. ___, 127 S.Ct. 2197, 2199, 167 L.Ed.2d 1081 (2007) (per curiam); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007).

In its recent decision in Bell Atlantic Corp., the Supreme Court announced the "retirement" of the oft-quoted "no set of facts" language from Conley v. Gibson, 355 U.S. 41, 45-47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), adopting in its place a "plausibility" standard. Bell Atl. Corp., 127 S.Ct. at 1969. As interpreted by the Second Circuit, Bell Atlantic Corp. did not announce a "universal standard of heightened fact pleading, but ... instead requir[es] a flexible `plausibility standard,' which obligates a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir.2007). The question is whether the pleading alleges "`enough facts to state a claim for relief that is plausible on its face.'" Patane v. Clark, 508 F.3d 106, 111-12 (2d Cir.2007) (quoting Bell Atl. Corp., 127 S.Ct. at 1974).

b. Liability Under 49 U.S.C. § 11706

The central issue before the Court is whether an intermediary shipping company like Yang Ming, that arranges for rail transportation but does not actually operate a railroad, can be held liable under the rail carrier provision of Carmack. If it cannot be held liable, the Carmack claims against it cannot proceed.

Part A, Subtitle IV, of Title 49 of the United States Code covers rail transportation. Section 11706(a) of Title 49—a provision of Carmack—provides:

A rail carrier providing transportation or service subject to the jurisdiction of the Board under this part shall issue a receipt or bill of lading for property it receives for transportation under this part. That rail carrier and any other carrier that delivers the property and is providing transportation or service subject to the jurisdiction of the Board under this part are liable to the person entitled to recover under the receipt or bill of lading. The liability imposed under this subsection is for the actual loss or injury to the property caused by—

(1) the receiving rail carrier;

(2) the delivering rail carrier; or

(3) another rail carrier over whose line or route the property is transported in the United States or from a place in the United States to a place in an adjacent foreign country when transported under a through bill of lading.

49 U.S.C. § 11706(a).

The definition of the term "rail carrier" is found at 49 U.S.C. § 10102(5), which provides that a "`rail carrier' means a person providing common carrier railroad transportation for compensation." 49 U.S.C. § 10102(5) (emphasis added). The term "receiving rail carrier" is only found in § 11706, and is not specifically defined anywhere in Title 49. The term "delivering rail carrier," on the other hand, is specifically defined in § 11706(a), which provides that a "delivering rail carrier is deemed to be the rail carrier performing the line-haul transportation nearest the destination but does not include a rail carrier providing only a switching service at the destination." 49 U.S.C. § 11706(a) (emphasis added).

2. Application

Sompo has pled facts sufficient to support a claim for relief against Yang Ming under Carmack.

a. Yang Ming May Be Held Liable Under 49 U.S.C. § 11706

Yang Ming argues that it is not a delivering rail carrier for purposes of Carmack, and, therefore, the Carmack claims against it must be dismissed. Yang Ming contends that it cannot be a delivering rail carrier because it did not provide the linehaul transportation nearest the destination, nor did it ever have possession of the freight. Yang Ming also argues that the Court's holding in the related case that NSRC was the delivering rail carrier precludes a finding in this case that Yang Ming is the delivering rail carrier.

I agree that Yang Ming is not a delivering rail carrier as defined in § 11706(a), because it was not the rail carrier performing the line-haul transportation nearest the destination. The narrow definition of delivering rail carrier found in § 11706(a) and my opinion in the related case do preclude such a finding. Sompo does not allege in its complaint that Yang Ming performed any line-haul rail transportation.

But the determination of the delivering rail carrier's identity is not dispositive as...